B&M Shares Crash After £7m Accounting Error Triggers £40m Profit Downgrade

Retail giant rocked by internal audit issue, CFO exit and falling investor confidence

Shares in discount retail chain B&M have nosedived after the company revealed a £7 million accounting blunder, leading to a £40 million downgrade in its full-year profit forecast.

The company’s chief financial officer, Mike Schmidt, is stepping down in the wake of the revelation, though he will remain in position until a replacement is appointed.

Accounting Mishap Sparks Market Turmoil

B&M announced that an internal audit had uncovered overseas freight costs that were not properly accounted for due to an operating system update earlier in the year. Although the system issue has now been resolved, the damage to investor confidence has already been done.

“The Group’s half-year financial consolidation process identified approximately £7 million of freight costs not recognised in cost of goods sold,” the company stated.
“The financial impact is material to our outlook for FY26.”

As a result, B&M has revised its full-year profit guidance from £510m–£560m down to £470m–£520m.

Immediate Share Price Fallout

The market reacted swiftly:

• B&M shares dropped over 18% at market open
• The decline settled to around 14% by mid-day
• The stock is now down 37% year-to-date
• Shares are trading at pre-COVID levels

This marks a significant blow to the retailer, which had already issued a profit warning on 7 October 2025, citing challenging trading conditions.

Growing Concerns Over Governance and Financial Controls

The accounting oversight has raised serious questions around B&M’s internal processes and financial oversight.

Analysts at Jefferies said: “Very poor optics for B&M, and an update that erodes trust further, highlighting potential issues in accounting controls and higher-level analytical review/oversight.”

The board has announced plans for a comprehensive third-party review into the incident to rebuild confidence among shareholders.

Trading Headwinds and Strategic Response

Even before the accounting issue, B&M had been under pressure from multiple fronts:

• Falling consumer demand amid the cost-of-living squeeze
• Tougher competition across the UK discount retail sector
• Rising costs due to government policies, including increased employer National Insurance contributions from April

Despite these challenges, B&M has reaffirmed expectations for like-for-like sales to remain in a “low single-digit range, either negative or positive” for the remainder of the financial year.

New CEO Tjeerd Jegen has launched a turnaround strategy aimed at:

• Lowering prices to boost competitiveness
• Addressing inconsistent pricing issues
• Improving product availability
• Simplifying the product range to enhance operational efficiency

Investor Sentiment: What Happens Next?

The market’s reaction reflects more than just a shortfall in earnings. The £7m accounting error triggering a £40m profit downgrade has raised red flags for investors and analysts alike.

Confidence in the company's accounting integrity and executive oversight has been shaken, and until the third-party audit concludes, share price volatility may persist.

That said, should B&M succeed in delivering on its turnaround plan, there's potential for long-term recovery—but only if governance issues are properly addressed and profitability stabilises.

Sources: (SKY.com, BBC.co.uk)